• I'm almost done reading <Thinking, Fast and Slow>. I was able to make it to the end because I had people reading along with me.
  • The chapter that particularly impressed me so far is Chapter 24, 'The Engine of Capitalism.'
    • I feel a sense of thrill when I see explanations showing that the world doesn't "just" run, but operates quite systematically on top of people's psychological tendencies, and this chapter was exactly that.
  • I especially liked how the book doesn't unconditionally criticize optimism and overconfidence, but treats them with duality as both a driving force for innovation and a risk that amplifies losses.
  • Honestly, this resonance might be my confirmation bias. I felt good because it seemed like the author organized the vague feelings I had with more solid examples and logic.
  • Still, the harvest from this chapter is clear. My perspective shifted from "let's abandon optimism" to "let's manage optimism." Let's keep the driving force alive, but take time to check if it's overconfidence before making important decisions.

Brief Summary

If this content catches your eye, reading the entire Chapter 24 will be satisfying. It's full of great examples and insights.

  • Chapter 24 expands planning fallacy into a larger framework. It says humans generally have an optimistic bias, and this is one of the most powerful biases in decision-making.

    • The world appears safer and more favorable than it actually is
    • I appear more competent than I actually am
    • Goals appear more achievable than they actually are
    • The sense that we can predict the future is exaggerated, leading to optimistic overconfidence

  • Optimism has many benefits for individuals (happiness, resilience, health, etc.), but in decision-making, it's "both a blessing and a risk."

    • Moderate optimism helps execution
    • Excessive optimism obscures risks

  • People who significantly move society (inventors, entrepreneurs, leaders) are likely to be more optimistic and overconfident than average.

    • They choose challenges and risk-taking
    • Confidence helps gather resources (investment, support, team morale)
    • It becomes the driving force that pushes execution forward
    • However, luck is mixed into outcomes as much as skill, and we tend to underestimate the role of luck

  • Many entrepreneurs and organizations know the statistics but tend to feel "I'm the exception."

    • Important keywords here are base rate (basic success probability) and outside view
    • It's hard to bring up the perspective of looking at how similar cases actually turned out, rather than my own plan

  • This chapter particularly emphasizes competition neglect.

    • We focus only on our plan, our capabilities, and the information we know
    • We underestimate competitors' movements, market changes, and variables we don't know
    • As a result, the illusion of control and overconfidence that "I just need to do well" become stronger
    • This tendency is linked to the psychology of "believing that what you see is all there is (WYSIATI, What You See Is All There Is)"

  • Overconfidence is not just a personal character issue; it can be structurally reinforced in "experts" and "organizations."

    • Even in situations where predictions don't match well, people set too narrow a range for how wrong they could be
    • Moreover, organizational culture dislikes "I don't know," creating an environment where those who honestly speak about uncertainty are disadvantaged

  • So the partial solution Kahneman proposes is the premortem.

    • Just before a decision, say "Let's assume this plan ended in disaster a year from now, and write down why"
    • Advantages:
      • Mitigates groupthink that occurs in teams whose minds are already made up
      • Makes doubt a 'normal task' rather than 'disloyalty'
      • Actively draws out risks that were missed

  • Ultimately, "the engine of capitalism" refers to

    • A structure where persistent and costly optimism and overconfidence that leaves losses for the majority
    • And driving force that creates innovation for the minority, both exist simultaneously

Things We—At Least I—Can Do

  • While reading this chapter, the phrase "the dead don't speak" came to mind. Success stories are widely shared, but failed attempts quietly disappear. I try not to forget that the stories I see and hear may distort reality.
  • At the same time, I want to be wary that as much as I resonate with this, it could be confirmation bias. The more I feel the pleasure of "Yes, I was right," the more I should question it.

  1. Revisit from the outside view (escape from inside view)

    • The reason my current plan looks plausible might be because I've stayed too long in the inside view.
    • Find similar cases and first check "how did most of them actually turn out?"
    • Start from actual results of similar cases, not my confidence.

  2. Check the base rate first (basic success probability)

    • Before "I think I'll do well," ask "how often do attempts of this kind usually succeed?"
    • Counter my default tendency to estimate high success probability and low cost and time.
    • If necessary, adjust the draft itself conservatively (add buffer zones for time and cost).

  3. Extract risks with premortem

    • Write "If we assume failure a year from now, what were the causes?"
    • Don't just increase anxiety; turn failure reasons into specific items.
    • Convert the top 2-3 of them into actions that can be taken right now.

  4. Use optimism for execution, but separate it from decision-making

    • Driving force is necessary. However, when making decisions, evidence is needed, not optimism.
    • The separation I want to try:
      • Decision stage: Be as cold-headed as possible with outside view, base rate, premortem
      • Execution stage: Push forward consistently with optimism and confidence
  • This book felt less like "a book that makes me smarter" and more like "a book that lets me know how I might be wrong."
  • How about opening this book once before facing an important decision?

References